Select Committee on Environmental Audit Written Evidence

Memorandum submitted by Atris Business Innovations


1.   What are the latest estimates of the likely shortfall in electricity generating capacity caused by the phase-out of existing nuclear power stations and some older coal plant? How do these relate to electricity demand forecasts and to the effectiveness of energy efficiency policies?

  Phase out of nuclear power will reduce UK generating capacity by some 12GW. Under current policies, the gap can be filled with new gas-fired generation at relatively short notice. Gas is a traded commodity, and can be purchased by those willing to pay the most.

  However, a shortfall in non-gas generating capacity will have an impact on both global and UK gas prices. It is therefore unwise to rely on gas to supply such a large proportion of the UK's electricity.


2.   What are the main investment options for electricity generating capacity? What would be the likely costs and timescales of different generating technologies?

  —  What are the likely construction and on-going operating costs of different large-scale technologies (eg nuclear new build, CCGT, clean coal, on-shore wind, off-shore wind, wave and tidal) in terms of the total investment required and in terms of the likely costs of generation (p/kWh)? Over what timescale could they become operational?

  Covering the major sources of supply:


  Nuclear plant based on AP-1000 would provide electricity at 2-3p per KWHr, based on manufacturers estimates.

  The fact that the industry has significantly under-estimated costs does not mean they will do so again. A few decades ago, underestimation of capital projects was routine (recall the Humber Bridge). Estimation techniques have approved across all structure builds to the point where a 20% over estimation is considered a disaster.

  Furthermore, early UK reactors were pioneering—there was no previous experience of nuclear power.

  Hence one can assume that the BNFL-Westinghouse figures are broadly accurate, which makes the UK White Paper plainly wrong to rule out nuclear power on grounds of competitiveness.


  Gas prices are quoted in million BTU, and currently stand at about $8. This is equivalent to 45p per Therm, or 1.54p per KWhr.

  A chart here gives historical figures between 11 (1996) and 40p (end 2004) per Therm.

  It seems that the latest gas turbines are about 50% efficient. So the fuel cost of gas electricity is currently about 3.1p per KWhr, and has varied between .75p and 2.75p. To this needs to be added capital and non-fuel operating costs. It appears the cost of gas-generated electricity is currently about 4p per KWhr. On top of this need to be added the cost of carbon credits.

  The industry predicted stable or falling prices in 2004 (see sues/gas/ilexreport.pdf). Since then prices have risen. The gas industry has an incentive to predict falling prices to prevent investments in wind and nuclear.

  If one assumes gas prices stay at $8 (and given no one really has a clue here, it seems prudent for a mid-case scenario, though over a period of decades, prices will probably rise substantially), then gas is not a competitive choice for electricity generation. This is bad news for the UK, which has put most of its eggs in the gas basket.

Offshore Wind

  Estimates range from 3p to 5.5p per KWhr (Royal Academy of Engineering). Atris has not studied these figures in depth, but would assume that with sufficient innovation from the offshore industry, prices could be towards the lower end of this scale.

  A critical area for wind electricity generation is the development and deployment of small-scale gas powered fuel cells, providing Combined Heat and Power. It is likely that within a decade, these could be a wide spread alternative to domestic and office boilers. They will in effect produce electricity as a by-product of heat. Hence, when a building needs heat, they can produce electricity at a cost of the price of gas. In summer, when the heat is wasted, the electricity is far more expensive. However, widespread deployment of these would provide a huge source of standby generating capacity. This in turn would enable wind energy to be deployed more widely.

  On shore wind may be cheaper than offshore wind, but has limited scope to make a major contribution to the UK's energy supply.

Severn Barrage

  This has been assessed for the DTI. Costs are estimated at under 6p per KWhr. This is not economically viable by itself. However, in the light of other benefits, the scheme should certainly be considered.

    —  With regard to nuclear new build, how realistic and robust are cost estimates in the light of past experience?

  Past experience cannot be used as a guide. If it were, no suspension bridge would ever have been built after the Humber Bridge.

  What are the hidden costs (eg waste, insurance, security) associated with nuclear? How do the waste and decommissioning costs of nuclear new build relate to the costs of dealing with the current nuclear waste legacy, and how confident can we be that the nuclear industry would invest adequately in funds ring-fenced for future waste disposal?

  The costs mentioned above have been internalised. The Government should raise a levy on nuclear power to fund the decommissioning costs no one can ensure that operators will remain solvent over 60 years.

    —  Is there the technical and physical capacity for renewables to deliver the scale of generation required? If there is the capacity, are any policy changes required to enable it to do so?

  It is feasible, however, wind turbine manufacturers are struggling to meet existing demand. 25GW of offshore capacity, providing an average of 10GW, by 2030 is quite feasible.

    —  What are the relative efficiencies of different generating technologies? In particular, what contribution can micro-generation (micro-CHP, micro-wind, PV) make, and how would it affect investment in large-scale generating capacity?

  As mentioned above, domestic scale fuel cells providing CHP would be of immense value. In Winter, they will provide electricity at a marginal cost of the price of gas, which is currently about 1.54p per KWhr. Where the heat is not used, one has to account for the generating efficiency. If this is 40% (a likely figure for gas powered fuel cells) then this is 3.85p. This latter figure is not competitive for base load electricity, but may provide highly valuable, immediately available capacity.

3.   What is the Attitude of Financial Institutions to Investment in Different Forms of Generation?

    —  What is the attitude of financial institutions to the risks involved in nuclear new build and the scale of the investment required? How does this compare with attitudes towards investment in CCGT and renewables?

  Financial institutions are understandably nervous about the scale and uncertainties. However, it is likely that large players such as Eon and EDF could obtain sufficient finance.

    —  How much Government financial support would be required to facilitate private sector investment in nuclear new build? How would such support be provided? How compatible is such support with liberalised energy markets?

  Financial Institutions, Constructors and Operators should be able to bear the construction and operating risks, and most of the revenue risks. However, the Government needs to remove some of the regulatory risks.

  In particular, costs and risks before construction need to be reduced. The planning process needs to be simplified significantly—there can be no repeat of the Terminal 5 enquiry costs.

  The Government should also bear any exceptional security costs required during construction and operation, and protect constructors, operators and investors in the event of "animal rights" style protests. As with "animal-rights" protests, it is society, rather than the generator that is largely responsible for these costs.

    —  What impact would a major programme of investment in nuclear have on investment in renewables and energy efficiency?

  Probably none. There is a need for about 40GW of new generating capacity over the next few decades. Renewables, Nuclear, and Energy Efficiency should all have a role. At present, gas is so dominant, that any investment in nuclear will be at the expense of imported gas.


4.   If nuclear new build requires Government financial support, on what basis would such support be justified? What public good(s) would it deliver?

  A number of benefits:

    —  Security of supply for a period of 60 years

    —  Reduced CO2 outputs, including the ability to meet Kyoto targets and longer term targets.

    —  Improved Balance of payments. On current policies, by 2030, gas imports will cost several tens of billions of pounds per year.

    —  Reduced funding to oil exporting countries. A lot of this money is used to fund terrorism, or to pursue aggressive foreign policies, or to delay sensible economic reforms.

    —  The ability to meet rising demand for electricity. Even with conservation measures, demand for electricity is unlikely to fall. If transport moves from oil to electricity, then demand could even rise.

To what extent and over what timeframe would nuclear new build reduce carbon emissions?

  Each GW of average output will reduce CO2 emissions by about 3 million tons per year. This will continue over its 60-year operating life.

To what extent would nuclear new build contribute to security of supply (ie keeping the lights on)?

  By 2010, the UK will be hugely dependent on gas supplies. By 2020, this is likely to come in large part from the former Soviet Union and the Middle East. Neither of these areas is noted for its stability. Gas from the former Soviet Union will come by pipeline, and pipelines are very hard to secure. It might be that the easiest way to impose terror on Britain in 2020 will be to blow up a pipeline in Eastern Europe.

  Beyond 2020, it is impossible to predict the prices of oil and gas. However, there are some commentators who believe that oil production will peak within a decade. If this is the case, then the price of oil would increase to well over $100 per barrel. The price of gas would follow. The lights might stay on, but electricity generation from gas might cost over 10p per KWHr.

  The scenario enclosed with this response would make such a threat less severe, and therefore less likely [not printed].

    —  Is nuclear new build compatible with the Government's aims on security and terrorism both within the UK and worldwide?

  For the reasons above, yes. As long as nuclear power stations and waste storage sites are well guarded, then the security is improved over a scenario relying on gas imports.

  Gas pipelines and LNG terminals are much easier terrorist targets than nuclear power stations, and as such would produce a higher security risk than the alternative nuclear plants.

  It goes without saying that nuclear materials need to be fully controlled and accounted for, and the whole nuclear fuel cycle needs to be managed in a secure manner.

5.   In respect of these issues [Q 4], how does the nuclear option compare with a major programme of investment in renewables, microgeneration, and energy efficiency? How compatible are the various options with each other and with the strategy set out in the Energy White Paper?

  On current trends, without nuclear, UK generation in 2030 is likely to be 20% renewables, and 80% fossil fuel.

  A build of eight reactors (AP 1000) would provide about 20% of the UK's capacity. The mix would then be 20% renewable, 20% nuclear, 60% fossil fuel.

  The attached scenario proposes generation to be only 4% fossil, with 30% renewables, and 66% nuclear. In this scenario, should renewables be more cost competitive, then they can take share from nuclear [not printed].

  Given the current dominant role of gas, nuclear build up to 66% of capacity is unlikely to have an impact on renewables.

  Energy efficiency is not directly related to generation mix, and should be encouraged regardless of supply policy.


6.   How carbon-free is nuclear energy? What level of carbon emissions would be associated with (a) construction and (b) operation of a new nuclear power station? How carbon-intensive is the mining and processing of uranium ore?

  This is not an issue. CO2 payback is within months of operations, and mining produces much less than 1% of the CO2 saved.

  The suggestion that nuclear power stations, or wind turbines, cause CO2 are smokescreens for other objections.

7.   Should nuclear new build be conditional on the development of scientifically and publicly acceptable solutions to the problems of managing nuclear waste, as recommended in 2000 by the RCEP?

  No. There are already scientifically acceptable solutions to the problems of waste. Public acceptability will be harder to achieve, but we have this problem whether we proceed with new nuclear build or not. Dealing with our current waste is a big, though manageable problem. Adding the waste from eight, or even 36, new reactors would not add significantly to this problem.

17 August 2005

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